COLOMBO, Sept. 22 (Xinhua) -- Fitch Ratings has upgraded Sri Lanka's Long-Term Issuer Default Ratings to "B-" from "CCC+," with a stable outlook, citing progress in macroeconomic stabilization, fiscal reforms and improvements in the country's external position.
The ratings agency said Tuesday that stronger fiscal and external balances, together with a modest rebuilding of foreign exchange reserves, had reduced external financing risks and strengthened Sri Lanka's capacity to absorb shocks.
Fitch expects Sri Lanka to record a primary surplus of 2.6 percent of gross domestic product (GDP) in 2026, down from 5.4 percent in 2025, while the overall budget deficit is forecast to widen to 4.1 percent of GDP from 2.3 percent.
Government debt is projected to decline to 92.9 percent of GDP in 2026 from 96.7 percent in 2025 and fall to the low-80 percent range over the next five years. However, Fitch said debt and debt-servicing indicators remain significantly higher than those of similarly rated countries.
The agency expects economic growth to moderate to 4.1 percent in 2026 from an average of 5 percent over the previous two years, with medium-term growth seen at slightly above 4 percent.
Fitch warned that external debt repayments are expected to rise over the next five years, particularly after 2028, leaving Sri Lanka vulnerable to external shocks and policy slippage.
The agency said further improvements in public debt ratios and foreign exchange reserves could support a future upgrade, while weaker fiscal discipline or renewed external liquidity pressures could lead to negative rating action. ■
